Benefiting from the improvement in the global economy and investment market performance, the Group's revenue reached approximately HK$572.5 million during the year ended 31 31 December 2010, representing an increase of approximately 25.7% when compared with same period in 2009. Profit for the year attributable to owners of the Company surged 69.1% to HK$64 million, net profit margin improved approximately 3 percentage points to 11.3%. Basic earnings per share were HK 18.6 cents.
During the year, the Group continued to maintain a healthy financial position, cash and cash equivalents were approximately HK$226.8million (31 December 2009: HK$83.8 million). Current ratio improved from approximately 1.0 as at 31 December 2009 to approximately 2.0 as at 31 December 2010. The Group had not incurred any borrowings as at 31 December 2010.
Operating Summary
In 2010, Hong Kong's economy has robustly improved, as stated in the HKSAR's Q3 economic report. In addition to a sharp GDP growth of 7.2% in the first half year, a rapid growth rate of 6.8% was registered in the third quarter of 2010, expectedly bringing the annual growth rate to over 6.5%. As unemployment rate continues to fall, income level rises remarkably, resulting in a significant increase in personal consumption expenditures and a very robust market. During the year investment opportunities abound, Convoy has successfully made its way to get publicly listed, being the first listed company in independent financial advisory services.
Since its establishment, the Group has been building a solid platform of three principal businesses in investment-linked assurance schemes, other insurance products business and Mandatory Provident Fund (MPF) schemes, providing a comprehensive range of investment products and services. Last year, the delay in the implementation of the Employee Choice Arrangement of MPF scheme does not deter the Group's pace of development in this segment. Subsequently it is confirming the Group's strategy to provide a full range of services.
Income contributions attributable to different businesses vary in the financial year. However, it is the Group's strategy to diversify its businesses and client portfolio to achieve a steady growth rate.
Investment-Linked Assurance Schemes
Last year the property market of Hong Kong had been prosperous, leading to a wealth effect that inflates the values of most assets. The appetite to consume has been reinforced with an increase in the demand for financial planning and investments. That has continuously sustained the Group's increasing earning ability. During the 12 months ended 31 December 2010, our profit had substantially increased due to incomes from investment-linked assurance schemes had increased 24.2%, compared to same period in 2009. Given a favorable investment environment, a return of investment confidence in the public, and the impact of Lehman incident, the public has a strong preference over financial companies and their choice is not limited to banks or insurance companies. All the above factors make the management feel very optimistic about our future prospects, with a will to strengthen the supporting measures to sustain a steady growth.
Mandatory Provident Schemes (MPF)
During 2010, the group has proactively developed the platform for MPF business. To make our MPF product range more comprehensive, we expand to have Bank of East Asia and Bank of China Prudential as our products issuers, adding more choices to a total of 9 MPF products issuers. At present our MPF products include most of the authorized schemes, product issuers and major practitioners in the market. In terms of service quality, fund choices, fund performance or service fee, we can be better equipped to offer professional advice to meet our customers' different needs.
As to the relationship with our contract suppliers, we manage to maintain a good strategic partnership with all of them. They are willing to support and sponsor our various promotion activities for MPF services. At the same time, they are active in our internal training program for MPF schemes and product workshops, etc.
Competition in the MPF market is gradually becoming intense; the choice of a quality provider will be crucial for a customer. We will incessantly monitor the market changes and stay close to our providers so that we can offer the most suitable MPF products to our clients for win-win opportunities.
Other Insurance Products Business
In the past year, the Group has spared no effort in developing other insurance products business. We continue to procure quality product issuers who allow us the most ideal product choices customized to our clients' needs.
Owing to our diversified product sales platform and Convoy' impartial positioning in independent financial planning services, the revenue derived from other insurance products business rose 79.6% last year. From the Group's perspective, this kind of business is still at its infancy. Yet with our existing strong client base, there are many opportunities for cross-selling and cross-referrals.
As we have the largest independent financial advisory team in Hong Kong, we will continue to expand and develop other distribution channels for financial planning services in order to comply with our consistent strategy to provide a comprehensive financial planning and insurance service dedicated to our customers.
Business Development
Steady Growth in number of consultants
Our talents are the Group's most valuable asset, which requires a corporate focus on staff training and development. Despite the industry is expanding with banks trying to recruit a lot more manpower, the Group has formulated different measures to cope with the keen competition in the talents market. Morale and efficiency amongst the staff is upheld and our growth rate has been stabilized at about 8%. The Group is scaling up in its effort to have more consultants to maintain its leadership position. Other than local graduates, the Group has been recruiting oversea and mainland students in Hong Kong.
Better Training, Higher Governance
The HKSAR government has released the consultation paper on the "Proposed Establishment of an Independent Insurance Authority". The Group has submitted its opinions through the official channel. With the setup of a new authority, the expectation for the overall service standard will rise higher in society. The Group has well prepared for the transition as well as the business expansion by a sound training process to enable our consultants to qualify for the licenses by undergoing adequate training. As to the number of MPF licenses by the end of 2010, nearly 70% of the licensed consultants have achieved the accredited qualification. We hope that by 2011, the ratio of 100% will be achieved.
Business Expansion
With the electronic trading platform gaining high popularity, the Group will develop its internet information platform as a high priority. It is hoped that the customers will enjoy faster, newer information, reinforcing knowledge-based client relationships. In developing new markets, the Group has expanded outside Hong Kong and performance in Asian markets is gradually taking shape. It is hoped that these markets will have income contributions for the group in the coming few years. The Group believes China will further open its market as the economic reform goes deeper, it will be one of the major new market developments with numerous business opportunities. Under the Closer Economic Partnership Arrangement, a Hong Kong company will enjoy a number of preferential treatments in operating a business in the mainland. The Group will seize the right opportunity, either by acquiring or setting a joint venture with a local practitioner in order to penetrate strongly into the mainland market.
Market Development
Merger and acquisition activities spring into action
The market for independent financial advisory is maturing in Hong Kong with banks, insurance companies and securities brokerages trying to get a share of it. Apart from developing the business on its own, merger and acquisition in the industry springs into action with more companies trying to expand faster by doing so. In this consolidation process, the market will witness a survival battle for the fittest. The Group will be closely watching the development and positively looking for any merger or acquisition opportunity, or working more with the renowned financial institutions to facilitate a business expansion for our stronger market leadership position.
Market competition over human resources
As the need and demand for financial planning increases, the role of independent financial advisory is becoming more significant. The inevitable shortage of human resources in the industry will further drive the intense market competition. We believe, however, that the Group has competitive edges in staff training and career planning in the industry, enabling the Group to compete and exploit the emerging opportunities. More important, our management team truly value people as talents, meeting regularly with the consultant teams for their opinions as well as experience sharing. That also ensure the consultant teams are developing along the Group's milestones in the same direction. In the future, the Group will maintain enough manpower in Hong Kong and the mainland market to cope with the new development.
We truly believe the establishment of a business platform in Hong Kong with an excellent management team will enable the Group to continuously develop its business in Hong Kong and the mainland China. Despite there is still a strict restriction against the participation of oversea financial institutions in mainland China, the Group has made meaningful progress in developing the business and our future prospects is promising. There are signs of recovery, but the global economy is not completely growing out of the difficulties. We remain optimistic to the development prospects in the region (China in particular).
We will continue to carefully expand our business, being discreet and sensible in our balance sheet performance and cost control. High performing talents are our key to future success. So we will strive to recruit and retain the right professionals to join the Group.
Lastly on behalf of the management, I would like to express our gratitude to our shareholders, our business partners/product issuers, our team of consultants, and all our colleagues for their continuous support to the Group.
Fong Sut Sam
Chief Executive Officer
Hong Kong, 28 March 2011
